Wednesday, April 29, 2009

Could you start a business with only $10 to spend? A good friend sent me an article about a professor at the University of Alabama who has each of his students start a business on $10 or less. The students have to plow any profits back into the business. Most of the kids started typical student service businesses, and most of them made some money. But a few started more unusual businesses, and some made a couple of thousand dollars.

The students liked the project because it really made them focus on the essentials of what it takes to start a business. Some said it was the best course they took in college. Professor Armstrong says it makes people realize how resourceful entrepreneurs have to be.

Tuesday, April 28, 2009

Seniors have Medicare, so they have health insurance. But it's getting harder and harder for them to find primary care physicians. The same thing is going to happen to the rest of us as more and more of the general population gets health care coverage. There just aren't enough doctors because the pay isn't good enough. This will be a bigger and bigger problem for small business owners, as the expenses of health coverage grows, but the supply of doctors doesn't. The New York Times ran a terrific article on the problem yesterday. I'm pasting a synopsis and link below.

Doctors don't think of their practices as a business. But it is. I know this is a problem because my own doctor is struggling with the low payments from insurers. It makes him want to rethink his practice and its business model. My daughter, who lives in Massachusetts, has told me stories of the doctor shortages brought about by the universal coverage that state has instituted. In Massachusetts, you're fined if you don't have health insurance. People who can't afford insurance must apply for it from the state. (It's like Medicaid.) But my daughter's friends who wound up with Mass Health coverage can't find doctors who will take it. They are going without.

This same problem is likely to hit the whole country if we have universal coverage. Medical school is expensive, so there are fewer doctors who want to become primary physicians where the pay is lower than it is for specialists.

So what should we do? I believe our country should subsidize doctors who will become primary care physicians, particularly ones who go out to serve the under-served. We need something like the Teach for America plan, only for doctors. I'm also hoping that lower salaries and bonuses and fewer jobs in finance will draw the best and brightest into medicine and science. I was so sad to watch my kids' classmates who were brainiacs in math and science all flock to Wall Street instead of the sciences. (Although one went to Google in marketing after majoring in chemistry at an Ivy League School.) The financial incentives simply have to change, or we will be paying more and more for medical care and getting less and less.

From the New York Times -- Health / Health Care Policy

Shortage of Doctors an Obstacle to Obama Goals

By ROBERT PEAR

Published: April 27, 2009

One proposal -- to increase Medicare payments to general practitioners, at the expense of high-paid specialists -- has touched off a lobbying fight.

Monday, April 27, 2009

Are you brimming with ideas? Have you developed several different products of services? Are you wondering how to structure a company and position it to investors and customers?

Time and again, I've learned that the average person can only take in one big idea at a time. Investors are people. They simply want to invest in a single, strong idea, product or service. Focus has power. Think of the difference between a flood light scattering light all around vs. the power of a laser. A laser can cut through hard material because it's focused.

Think of Amazon. They started with books. Only after succeeding with books did Amazon branch out into retailing other items.

So focus your energy on your favorite project. You'll be amazed at what you can accomplish.

Friday, April 24, 2009

One of the biggest mistakes entrepreneurs make is thinking that if they create some cool new product or service that it will appeal to everyone. It won't. To sell a product or service, you really need to get a handle on who needs it and will buy it. Who is your target audience?

I'm facing this right now in my volunteer work as a board member of Aging in Place in Darien. We want to be all things to all seniors in our town. But I don't know if we can be. Our town's senior center serves one subset of seniors on M-W-F and a different subset on T-Th. The Darien Community Association serves still another. Can we reach and serve all these market segments? How? Who has the biggest need? Can we satisfy the need of that target?

When you're planning your business, you need to think hard about this question. It will help you clarify your marketing -- your message and how you will get your message out.

Thursday, April 23, 2009

Two days ago I attended a presentation in White Plains, NY, by lawyers in the Pro Bono Partnership on the "Myths and Realities of Starting a Nonprofit." It was eye opening. You need to file incorporation papers with your state. You need an EIN number from the IRS. Then you need to fill out form 990 with the IRS to apply for tax exempt status. And you need to send regular reports to your state attorney general and the IRS. But that's not all.

These lawyers made it very clear that you need a business plan to start a nonprofit. You need to know how you'll generate income. A nonprofit is a business, but it's a business that simply must plow all its income back into the business, rather than distributing it to share holders. A nonprofit's purpose must be to support the public good in a unique way.

Feel free to contact me with questions. If you need a business plan for your nonprofit, email me at: upstartwyn@gmail.com.

Monday, April 20, 2009

It looks like more start-ups and expansion stage companies are going to have to bootstrap, rely on organic growth or seek funding from friends and family. Banks are curtailing lines of credit or raising interest rates to usurious levels. And now the New York Times reports that VC funding is way down. Green technology funding is particularly hard hit. Article synopsis:

Business / Economy

Venture Capital Investment Sinks

By CLAIRE CAIN MILLER

April 18, 2009

In the first quarter, only $3 billion was invested in 549 young companies, according to analysis by the National Venture Capital Association and PricewaterhouseCoopers.

Thursday, April 16, 2009

I first heard of personal branding over 10 years ago, long before this whole social networking trend took off. The mantra then was to decide how to differentiate yourself and then be consistent. That advice is still being given out today. It's advice well heeded.

In fact, the most important point of a long Knowledge@Wharton article on self branding (link below) is that you really need to brand yourself to get find employment, stay employed or have a successful business as a sole proprietor. These Wharton professors are still saying that you must also be consistent in your branding. Ask yourself these questions: What are you? What differentiates you? What value do you bring? Then, foster that image online and off.

Tuesday, April 14, 2009

I have been interested in social entrepreneurship for years. Social entrepreneurs start businesses that have a socially responsible mission. I just learned of a new business incubator in Philadelphia, PA, that is focused on helping social entrepreneur get started and grow. It's called GoodCompany Ventures. They have just issues a call for applications for entrepreneurs who need office space, mentoring, sources of capital and community.

Here's some information the sent me:

GoodCompany Ventures, a unique incubator for businesses with social impact that has just announced a "call for applications" for the summer 2009 cycle.

GoodCompany Ventures catalyzes start-ups with innovative solutions to big, unmet social needs. GoodCompany entrepreneurs get a great place to work, a community of like-minded entrepreneurs, and access to a network of capital sources and expert advisors.We champion models that offer investors both financial return and social benefit.

Entrepreneurs accepted into the program receive extensive training and mentoring over a nine-week period, followed by a venture funding fair. Unlike other incubators, we do not extract an equity commitment from entrepreneurs, but expect a commitment of time and effort toward building a community of social entrepreneurship.

This new program was founded by Resources for Human Development, Inc (RHD), an innovator in social finance with a successful track record in social enterprises; Murex Investments, a "double bottom line" equity fund backed by leading financial institutions; and leading entrepreneurs and executives such as:

GoodCompany Ventures is currently recruiting dynamic entrepreneurs in a variety of industries, with particular interest in clean-technology, education, technology and other industries with integral social impact. The application is open until May 15, 2009, with a rolling admissions policy.The first acceptances will go out on May 1st.

Wednesday, April 8, 2009

I assume that some of Germany's success comes from the fact that energy is more expensive in Europe than in the U.S. and that their government and industries are more in favor of green initiatives than ours. But I also wonder if they are more innovative because they don't tax capital gains. Think of how much more incentive industry, entrepreneurs and venture capitalists would have to invest in new technologies, if the capital gains they reaped were not taxed.

Maybe the Democrats have it all wrong. Maybe the way to get our country going again is to eliminate the capital gains tax and to give tax credits to green energy initiatives. (At the same time, we should slap payroll taxes on all earnings -- all those millions given to AIG and investment banking leaders. That could save social security and Medicare. Then, remove the payroll tax on people earning under $25,000 to put more money into the pockets of the working poor.)

We should be looking more at tax incentives and making green energy investments worthwhile.

Monday, April 6, 2009

Why do most new products and new businesses fail? There are a lot of reasons, but one of the most fundamental reasons is that the product or service doesn't fill a real need -- or at least a big need.

Some products fill a passing need -- like having fun. A new toy or game that is really fun to play can take the nation by storm because people need entertainment. People love games. Think of games or toys that once were fads -- hula hoops, Trivial Pursuit, Pacman....

But these are not fads anymore. The need to play something new has taken over. Some games, however, last forever -- Monopoly comes to mind. What makes that game endure? Will Sudoku last?

Think of other kinds of games, like tennis. What needs do tennis players have? Clothes that are comfortable, tennis rackets that make hitting easier, balls that bounce well longer, tennis rackets that won't give you tennis elbow, medical devices that help prevent tennis elbow or bad knees...

What needs can you think of?

Products like Under Armor keep you comfortable while playing, the Prince tennis racket when it first came out made so-so players hit more balls well, rackets that reduce vibration put less wear and tear on the elbow, arm bands reduce the shock to the elbow....

Think of all the things you and others do. What needs do the products you use fill? Why do you buy them? Why do you hire people to do things for you?

When you're starting or running a business, you really need to think about how much need is out there. How many people really need your product? Why?

Friday, April 3, 2009

The Center for Venture Research at the University of New Hampshire says that 55,480 entrepreneurial ventures received funding from angels in 2008. I'm copying and pasting the whole article below.

Angels are funding fewer ventures, but they're risking about the same amount of money as they did in 2007. Angels only fund about 1% of the plans they see. That's why it's crucial to have a really solid business plan to demonstrate why your venture will succeed and return the investors' capital to them many times over. For tips on writing a great business plan, see www.upstartbusinessplanning.com.

Angel Investments Down in 2008, But Not Deals

Angel investments dropped in 2008 by 26.2 percent over 2007, but the number of deals was relatively unchanged, with 55,480 entrepreneurial ventures receiving funding, according to the 2008 Angel Market Analysis released by the Center for Venture Research at UNH.

The angel investor market had a considerable contraction in investment dollars from last year but exhibited little change in the number of investments, according to Jeffrey Sohl, director of the Center for Venture Research at the Whittemore School of Business and Economics.

Total investments in 2008 were $19.2 billion, a decrease of 26.2 percent from 2007 when investments totaled $26 billion. However, 55,480 entrepreneurial ventures received angel funding in 2008, a modest 2.9 percent decrease from 2007 when 57,120 entrepreneurial ventures received angel funding. The number of active investors in 2008 was 260,500 individuals, virtually unchanged from 2007’s 258,200 individuals.

“The significant decline in total dollars, coupled with the small decrease in investments resulted in a smaller deal size for 2008, a decline in deal size of 24 percent from 2007. In contrast to venture capital, in which money must be invested during the life of the fund and is in part based on the size of the fund, angel investing is an individual decision and angels invest from their net worth. These data indicate that while angels have not significantly decreased their investment activity, they are committing less dollars resulting from lower valuations and a cautious approach to investing,” Sohl said.

Healthcare services/medical devices and equipment accounted for the largest share of investments, with 16 percent of total angel investments in 2008, followed by software (13 percent), retail (12 percent) and biotech (11 percent). Industrial/energy accounted for 8 percent of investments, reflecting a continued appetite for green technologies, and media (7 percent) rounds out the top six investment sectors.

“Retail and media have solidified their presence in the top six sectors, mainly due to a continued interest in social networking ventures,” Sohl said.

Mergers and acquisitions represented 70 percent of the angel exits, and IPOs 4 percent, in 2008. Bankruptcies accounted for 26 percent of the exits. Annual returns for angel’s exits (mergers and acquisitions and IPOs) were 22 percent, however, these returns were quite variable.

Angels have maintained their position as the largest source of seed and start-up capital, with 45 percent of 2008 angel investments in the seed and start-up stage, a slight increase of 6 percent over 2007. Angels also exhibited an interest in post-seed/start-up investing with 40 percent of investments in this stage, also an increase from 2007. Expansion stage investing (14 percent) showed the largest decline. New, first sequence, investments represent 63 percent of 2008 angel activity, unchanged from the last two years, indicating a continued preference for new, as opposed to follow-on, investments.

The Center for Venture Research has been conducting research on the angel market since 1980. The center’s mission is to provide an understanding of the angel market and the critical role of angels in the early stage equity financing of high growth entrepreneurial ventures. Through the tenet of academic research in an applied area of study, the center is dedicated to providing reliable and timely information on the angel market to entrepreneurs, private investors and public policymakers. For more information visit www.unh.edu/cvr or contact the center at 2-3341.

Expert tells how to market inventions

Inventors trying to market their creations should start by answering one question, said Wyn Lydecker, a marketing communications expert from Darien.

"What are your invention's main benefits?" she said Tuesday during a talk on entrepreneurial marketing at the monthly meeting of the Inventor's Association of Connecticut, held at Fairfield University. "You have to focus on that."

Lydecker, a former co-director of the Small Business Resource Center at Norwalk Community College, owns Upstart Business Planning in Darien and is on the board of advisers of Charter Private, a startup firm in New Jersey. She also was the managing director of Business Plans International in New York.

Lydecker, who has a master's in business administration from Wharton School of the University of Pennsylvania and has lectured at the University of Bridgeport, also teaches business planning for Darien Continuing Education.

Other queries need to be addressed once the perks ­-- such as safety, convenience or cost saving -- are identified, Lydecker said.

"How are you going to sell it, and where?" she said to about 15 inventors and marketers in attendance. "You also have to work out how much people will eventually pay for it."

Inventors may consider using e-mail or YouTube or creating a Web site to market their new idea. They also may go the more traditional route of networking, selling it through a catalog or crafting a sell sheet, Lydecker said.

The

sell sheet, a one-page form designed to help promote the invention, should begin with the product's name and a catchy description of its main benefit. It also should list other benefits and its features and show a photograph of the invention, Lydecker said.

It also is important to let manufacturers know where the invention will sell, said Mary Ellroy, the association's president emeritus and a toy inventor from Norwalk.

"When I go to companies with an idea, I tell them why Wal-Mart's going to like it," she said. "You may want to think about what stores want."

Inventors, facing increased scrutiny from angel investors because of the slowed economy, must be specific in describing their product's purpose when seeking grant money, said Merrie London, manager of Small Business Innovation Research with the Hartford-based Connecticut Center for Advanced Technology.

"The biggest mistake people make is they tell an agency what a great idea they have, and then try to shove it down their throats," she said.

Wednesday, April 1, 2009

If you want to market a product, a service or an invention, you need to ask yourself why anyone would buy it. What's in it for them? Will they buy it because it's got all sorts of cool technology? No. They'll buy it because it fills a need.

Last night I gave a presentation on marketing to IACT - the Inventors Association of Connecticut. One of the points I really focused on was the concept of the benefit. What's a benefit? In pain relievers, it's relief and being able to get on with your day. For a business person, it's probably increasing the bottom line. Think about all the products you use. Why do you use them?

Now, think about the product you want to sell. Why would anyone want to use it, let alone spend money to buy it?

Understanding your key benefits is one of the first steps in developing effective marketing and in developing a winning business plan. Remember -- people buy benefits, not features.

About Me

Owner of Upstart Business Planning: I craft business plans that answer the questions investors ask most often. Co-Author of The Purpose Is Profit: The Truth about Starting and Building Your Own Business and The Startup Roadmap: 21 Steps to Profitability"

Only 1 - 2% of business plans raise funding. 60% of the plans I've done have helped owners raise capital.

I was a founder of and former board member of At Home In Darien (formerly Aging in Place+Gallivant), a nonprofit in Darien, CT.
* MBA from Wharton in Marketing and Finance.